Commodity Report

Many sources report seeing particularly high inventories lately. The pileups include all grades, but especially old corrugated containers (OCC).

While a source on the West Coast reports No. 8 and No. 9 news, as well as mixed paper, showing some signs of strength, many others report a sluggish market all around. Generation is fine, even up in some cases, such as with old newspapers (ONP); however, orders have been harder to come by than usual.

One source says it feels like the traditionally slow summer market is stretching into autumn. "The shine is off" the recovered paper market, says a Midwestern recycler.

Several factors have been contributing to the slow-motion market, factors that might not have had such an effect if they’d occurred independently. But sources say the combination has been taking a toll.

Freight problems have been complicating the market, which has been suffering from weaker prices in the first place. One source says that trucking is being strained by additional demand from the fallout following Hurricanes Katrina and Rita as relief agencies send emergency supplies to the affected areas. Added to that, the early autumn months are also harvest time, creating more competition for trucks on the road.

In addition, rising fuels costs have been chipping away at margins for months, adding to the bigger problem with transportation. "Transportation is not available at the levels we need," says one Midwestern packer.

Fuel costs, freight issues and weak prices have combined to create a very sluggish atmosphere in the recovered paper industry. Product is moving, sources say, just very slowly. One packer reports taking lower prices—up to $10 below the published asking prices—just to move material.

Current market conditions haven’t changed much over the last few months, prodding some mills to start changing their mix a little, one Midwestern recycler reports. Some buyers have discontinued the grades they traditionally seek and have started buying new and different grades, which has added some disruption to the market as a whole.

Sources continue to echo the same cautious optimism that as the busy packaging season approaches, the market will see some improvement.